Jim Gilbert's Austin Real Estate Blog

Buying an Austin Texas Home: The Offer Process

Many people who want to buy a home in the Austin, Texas area (including first-time buyers) need to know more about the steps involved in buying a home. Here are some notes (most describing the process for buying a resale home) that are intended to help you understand what you need to do and might expect when you set out to buy a home:

1. Choose a Realtor® who will not only represent you, but will help with your research and educate you about the home-buying process. I research the history of the house (archives), taxes, market activity, neighborhood, flood plain, etc. to provide you with the information you need to make an informed decision and a good offer on a home. A written buyer representation agreement is a must.
2. Get preapproved for your mortgage by a reputable lender. This part of the process is best begun before looking at homes in person. Why? Most sellers want to know that those who are looking at their homes are ready and able to buy their home if it suits them. Attaching a preapproval letter strengthens an offer. Getting preapproved also lets you know what you can afford to buy and what terms you can expect in a loan.
3. Define your search criteria and do your homework. Start your Austin area home search with online searches a good while before your purchase. This helps you to get to know what is on the market that meets your criteria (price range, bedrooms, location, etc.). While there are a number of national sites available, such as Realtor.com, the best sites are local and are updated daily (like HeartofAustinHomes.com). I have often been asked for information about particular houses found on other websites, only to find that the home is already under contract or has been sold.
4. Decide if you want to purchase a new home or a resale (pre-owned) home. There are advantages to either. In the current market, buyers are bargaining with builders and are often getting some good deals with price reductions and incentives. Whether you buy new or "old" it is best to have a knowledgeable Realtor® on your side. Resale transactions are done on a standard contract written by the Texas Real Estate Commission. Each new home builder has its own contract. Also, if your Realtor® cannot be with you when you visit a new home community, let the sales representative know who your agent is (hopefully, me! ).
5. Look at homes. It is best not to look at too many homes. Why? All the details begin to run together. When a home has been seen, note the pros and cons about it and decide if it is a "keeper." Move on to the next home, and repeat the process. By eliminating homes and neighborhoods online and in the field, you can shorten the process of finding the home you want to buy.
6. Decide on the basics of your offer. These include the offer price, how much down you will pay (3.5% for FHA loans), how much you will finance, how much earnest money you will offer and which title company will be used. Some other factors to consider are who pays for title insurance (usually the Sellers) and for a new survey if one is needed. When do you want to close the purchase? Will you ask the Sellers to pay any of your closing costs? And, do not forget the termination option and fee that allows you to terminate the contract for any reason. There are more things to consider, but these are the highlights. Remember also that the fewer contingencies (sale of another home, e.g.) there are in an offer the stronger or more attractive the offer will be to the Sellers.
7. Prepare the offer. I prepare your offer on the correct form with all of the needed addendums and notices. You will then initial each page and sign the offer. Any addendums (3rd party financing condition, e.g.) will also need your initials and/or signature.
8. Be prepared to write two checks (personal checks are okay). The first is your Earnest Money deposit (made out to the title company, and typically 1% of the offer amount). The second check is for the Option Fee (made out to the Sellers, and typically $100-$200). My practice is to hold the checks until your offer is accepted. Be sure that there is enough money in your account to cover these checks.
9. Deliver the offer to the Sellers' Agent. I will do this by fax, by email or in person. I attach copies of the two checks and your loan preapproval letter to the offer. You can also include a note to the Sellers that tells why you like their home.
10. Wait for a response (sometimes the hardest part of this process!). The Sellers' Agent will analyze your offer, prepare a summary of the offer that indicates what the Sellers will net from the sale (Sellers' net sheet), and submit the offer to the Sellers. The Sellers have three options:
• Accept your offer "as is";
• Reject your offer (and, if they want to, ask you to submit another, stronger offer);
• Make changes to your offer and send it back to you as a counteroffer. The process of making counteroffers and negotiating continues until you and the Sellers agree to all terms of the offer, or until either the Sellers or you finally reject the other’s terms.
11. The contract is executed. When you and the Sellers have agreed to every term, and every change has been initialed and every page needing a signature has been signed, the Realtor® in possession of the contract at that time inserts the date into the contract. The term "executed" is used to describe this moment in the process (i.e., when the contract becomes legal and binding). All parties to the contract must be notified that the contract is in force. Other time-sensitive terms in the contract begin with this date.
12. Deliver the executed contract and checks. I then deliver the executed contract (if I have it) and the Earnest Money check to the title company, where they are “receipted.” I also deliver the Option Fee check to the Sellers or to the Sellers' Agent. This must be done within the first two days of the contract, or there is no option period. The contract requires that the option fee be receipted also.

One last note: From the time a contract is finalized, it takes roughly 5 weeks to close the transaction. This time can be shorter or longer, depending on how quickly the process moves. Sometimes the lending and appraisal process is the slowest part.

For help in purchasing an Austin area home, please give me a call at 512.913.1557.